The Fed keeps an eye on commercial real estate
The Daily Deal reports: When Federal Reserve Chairman Ben Bernanke meets with his fellow governors Tuesday, the state of commercial real estate market is sure to be high on their agenda. While a deterioration in the residential real estate market kicked off the recession, the rapid decline of the commercial market could quickly undo all the recovery efforts taken so far.
While there are "green shoots" showing up throughout the U.S. economy, commercial real estate isn't one of them. Last month, Realpoint Research reported that June delinquencies in commercial mortgage-backed securities rose an "astounding" 585% to a 12-month high of nearly $29 billion. In June 2008, delinquencies totaled only $4 billion.
Other assessments of the commercial real estate market were even more alarming. In July Real Capital Analytics found 5,315 troubled commercial properties nationally, valued at more than $108 billion; and in June, Real Estate Econometrics LLC predicted that the default rate on commercial real estate is likely to reach 4.1% by year's end. That projection would imply defaults on about $44.3 billion of commercial mortgages, based on the $1.08 trillion of such loans held by U.S. banks in the first quarter, according to data in the report.
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Posted by: Nina Turner